HYDRAULIC FRACTURING:

Colo. starts levying fines for late FracFocus reports

Mike Soraghan, E&E reporter

EnergyWire: Friday, October 18, 2013

Colorado is pursuing 11 companies for neglecting to report hydraulic fracturing chemicals to the FracFocus website, the first time a state has undertaken broad enforcement of its disclosure requirements.

The move follows reports that more than one-fifth of the reports companies filed for wells in Colorado and Pennsylvania last year were late (EnergyWire, June 7). That prompted criticism that state officials weren't making good on promises to scrutinize drillers.

But this summer, the Colorado Oil and Gas Conservation Commission warned companies it would begin "active enforcement" July 1. After that, state officials say, companies became more diligent. Peter Gowen, the commission's enforcement officer, said the warning "probably assisted in capturing their attention."

Seven of the companies have agreed to settle the cases with $1,000 fines, and commission staff is still negotiating with one of the companies. Two cases have been continued to December, and one case, against Marathon Oil Corp., has been set for a contested hearing at the commission's Oct. 28 meeting in the eastern Colorado city of Limon.

Most of the cases are scheduled to be taken up by the commission at that meeting.

North Dakota is the only other state known to have fined a company for failure to disclose. State officials sought a $300,000 fine from Slawson Exploration Co. after discovering during a spill investigation that the offending well wasn't on FracFocus. The state Department of Mineral Resources (DMR) recently settled for about $67,000, with an additional $50,000 suspended for one year.

North Dakota hasn't taken action against any other operators for failure to disclose, a DMR spokeswoman said yesterday. Pennsylvania also has not taken action against delinquent companies.

Executives and representatives for most of the accused companies in Colorado said the violations stemmed from innocent mistakes.

Denver-based Bill Barrett Corp. was cited for 12 wells. Company spokesman Jim Felton said the company had glitches in its reporting system when the requirements kicked in last year.

Kip Joda, general counsel for McElvain Energy Inc., said the Denver-based company did file reports for the two wells involved. But they were incorrectly entered into the new version of FracFocus when the old version was still in use. He said the company plans to contest the violation in December, if only to get its side of the matter in the record and make clear that it takes disclosure seriously.

"We don't blow these things off," Joda said. "We're hopeful that the commission will find this to be an excusable error."

Feet to the fire

Gunnison Energy Corp. President Brad Robinson said he was "somewhat shocked" when he realized that his Denver-based company had made a clerical error on two wells, because public disclosure is a priority for the company. He said Gunnison won't be contesting the case.

Laramie Energy LLC was cited for failing to file the ingredients used at a well where fracking started before the rule went into effect, but finished afterward.

"It was our mistake," said Bob Hea, vice president for engineering and operations at the Denver-based company. "We misinterpreted that."

A ConocoPhillips Co. spokeswoman said the company believes it filed its report on time but has agreed to a $1,000 fine. She said the company has also "instituted a process within the company and with our service provider to ensure timely reporting in the future."

No FracFocus report has yet been filed for the well listed under the state's complaint against Marathon. State records indicate Marathon operated the well at the time it was fracked in June 2012, but another company is now listed as the operator.

"The company contesting the enforcement action has not performed the requested corrective action because it does not believe it is in violation," Gowen said.

Bruce Baizel, director of Earthworks' Oil & Gas Accountability Project, said he's glad to see the state following through on its promise of more diligent enforcement.

But he said it showed that industry groups "should be spending more on educating members about compliance with regulatory requirements and less on fighting residents over drilling in backyards."

FracFocus came under increased scrutiny after a study by Harvard Law School's Environmental Law and Policy Program said it "fails as a regulatory compliance tool" in part because it gives drilling companies too much leeway to miss deadlines (EnergyWire, April 23).

Hydraulic fracturing is part of drilling a well to produce oil and gas. In the shale drilling that has revolutionized the U.S. oil and gas industry, fracking crews pump millions of gallons of chemical-laced water and sand to crack open the rock and release oil and gas.

The 2-year-old FracFocus website was originally designed for voluntary disclosure, providing people who live near a well with information about the chemicals poured into it. But as states have started ordering disclosure of chemical information, it has evolved into a tool to comply with those state rules.

Critics like Baizel say FracFocus doesn't work for mandatory disclosure because it's poorly designed and leaves out critical information.

State oil and gas officials are to discuss changes to FracFocus next month at the annual meeting of the Interstate Oil and Gas Compact Commission in Long Beach, Calif. Among the topics they are to discuss are upgrades, search features and public use of the data.

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